Walmart Inc (WMT)

[big-yank]

I believe that a big portion of the topline growth at Wally is being driven by drought-related food price inflation. Walmart is able to cope better with rising prices than most grocery competitors based on size, geographic omnipresence and buying office skills and leverage. I am seeing the Walmart retail price edge on grocery staples widening vs. Kroger, Supervalue and others, inevitably leading to increased market share on the grocery side.

A secondary driver is on the pharmacy/HBA side where Walmart's $4 generic program has been enhanced by the emergence of new, high volume generic drugs and the lingering affect of a dispute between Express Scripts and Walgreens. WMT has been the beneficiary of a big chunk of Walgreens Rx clientele which also buys general merchandise items while they are in the store. The margins on generics, while heavily discounted, are actually better than typical grocery margins which partially offsets the lag of retail food prices catching up to inflation.

In terms of consumer spend, Q4 is the one quarter where grocery volume is relatively impervious to the weakened economy and, in fact, tends to drag along the sale of a lot of higher margin goodies as shoppers may cut spending on discretionary gifts but will ALWAYS put a great spread on the table for the holidays.

I think that Walmart is going to close out the year on a high note and remain heavily invested in WMT stock.